4 Alternatives to Consumer Credit Counseling

Consumer credit counseling is not always as wonderful as it seems to be. Some credit counseling agencies work in the interest of banks and arrange monthly payments that are only slightly lower than you were paying in the first place. As an alternative to paying an agency for the minimal help that they can offer, trying managing your debt by yourself. Consider the following "do it yourself" alternatives to consumer credit counseling.

Debt Settlement

You can try to negotiate with your creditors on your own. There is no law against it, and this can sometimes work out in your favor. Creditors may be willing to remove negative information on your credit report or reduce interest rates. If you have already missed payments, pay at least some of the amount due and then call to discuss a plan to pay the remaining amount due over time. Lenders may be more willing to negotiate if your account is not up to date, however you should never try to miss payments on purpose in hopes of a negotiation.

Liquidate Your Assets

If you have CDs or retirement accounts, considering using some of the money to pay off your debts. Weigh the options carefully, and consider that removing money from these types of accounts will come with interest or tax penalties. You should consult a professional to find out how much of a penalty you will be responsible for in order to determine whether or not using this money to pay your debts is worth the effort.

You can also sell your belongings. Try having a yard sale or selling items online. Furniture, books, cars, jewelry, and virtually anything of value can be sold to help you with your debts. This may not be the easiest thing to do, but it can help you reduce your debt.

Debt Consolidation

It is possible to obtain a debt consolidation loan that can reduce your overall monthly payments to on single charge. Make sure that the interest rate will be lower than what you are already paying your creditors. It may not be a good idea to consolidate all of your bills to a single credit card, as this may cause you to appear "maxed out." Applying for new credit cards just to achieve a lower interest rate could also reflect poorly on your credit report. It is best to try to get a loan that will save you money, and help you to pay off your debts faster.

File for Bankruptcy

Bankruptcy should be the very last alternative that you consider. The court will determine which debts will be eliminated or reduced and which ones you will be required to pay. Your credit report will show that the remaining debt owed on certain obligations will be zero. Filing for bankruptcy, however, is not viewed favorably, as your history will show that you did not paid what was owed.

While many of your debts may be brought down to zero, there are some financial obligations that will remain after the bankruptcy process. These include some taxes, child support, alimony, student loans, and court orders. There may also be some tax liability on your part for the amounts of forgiven debt. If you are not willing to relinquish your ownership of secured debts, such as a financed automobile or your home, you will still be required to many monthly payments on those debts.

All in all, there is little that a consumer credit counseling firm can do for you that you cannot do for yourself. One or more of these alternatives may prove effective in eventually repairing your credit, without the service fees.

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